Modelling the value of your network effects

The power of network effects in creating a defensible business has become widely recognized across tech circles. If your product provides value via an interconnected group of users, then even if a faster, slicker, more UX friendly product appears, it would be difficult for them to steal your users without the network in place that provides the core value of the product.

However, many people do not attempt to formalize their understanding of how network effects relate to the actual value of the product. Understanding value creation is crucial as it is the underlying driver of retention and engagement. The lack of understanding leads to situations where people assume that simply acquiring more users is directly proportional to value creation, or they build features they think will enhance the strength of the network but actually do not.

For example, this is on the surface level how people think about network effects:

Figure 1: Many people simply assume value creation is proportional to the number of users

This is never the case though. Simply having a lot of users does not create value. There is a layer in-between “Value” and “Number of Users” that represents your product. It is this layer that causes the differentiation between just a bunch of people and a valuable network.

Let’s dig into an example: LinkedIn. The core value of LinkedIn is being able to network, recruit employees, and get recruited. This is fuelled by the quantity and quality of professional profiles in the product where:

quantity = total number of users that actually have any details filled in

quality = depth of information on work history, references, education etc. in their profiles

These two elements are a function of users acquired, which then feeds into the value. Therefore, the point to emphasize here is that even if LinkedIn acquires a billion users, if none of those users fill in their professional identity, no value is created. Of course, those users can gain value from viewing others’ profiles, but they are not creating any value for LinkedIn as a product.

…even if LinkedIn acquires a billion users, if none of those users fill in their professional identity, no value is created.

Figure 2: Network effects of LinkedIn — Value is a function of Professional Identity, which is a function of Users

When LinkedIn is prioritizing tactics that will increase network effects, they should not only aim to acquire more users, but focus on increasing the quality and quantity of profiles being filled in by those users.

This simple model can be applied to any network effects type product. Here’s another example for Reddit, where in contrast to LinkedIn, there is no focus on identity:

Figure 3: Network effects of Reddit — Value is a function of Content and Comments, which is a function of Users

In Reddit’s case, the value of the product is hinged on users contributing content and commenting, not just the total number of users. If there was no content and comments, Reddit would literally be a blank website. Once again, to generate strong network effects it is not just about acquiring more users, it is acquiring users that contribute content and comment.

Adding in new elements of network effects

In addition to giving you a better understanding of what you need to optimize your user behaviours towards. Modelling network effects enables you to understand what features to build that will add in a new element of network effects.

For example, Facebook has many different elements of network effects in play. They offer value through real identity (like LinkedIn), content (like Reddit), messaging, groups, events and various other features. To increase the defensibility and value of your product, you should consider adding more elements of network effects. You can visualize what these elements would look like with your product using this model:

Figure 4: Modelling new elements of network effects

When I applied this at Figure 1 where I work (a mobile community for healthcare professionals to share and discuss medical cases), you can see our primary value has been created through comments and medical case uploads:

Figure 5: Network effects of Figure 1 — Value is a function of Cases and Comments, which is a function of Users

However, we recently added in direct messaging which creates another element of value from network effects:

Figure 6: Additional element (direct messaging) of network effects on Figure 1 that generates a new type of value to users

Conclusion

There are an unlimited number of ways network effects can be generated, but understanding what is specifically creating the value for your product will be essential in making product decisions.

I encourage you to analyze the core value that is created in your network effects type product, determine the elements of the network that contribute to it, and prioritize changes that will increase the quality/quantity of those elements. If you feel you are hitting a ceiling in optimizing the existing value you provide, then consider what changes you can make to create a new type of value from network effects for your users.

If you apply this and generate any interesting insights, I would love to hear about it at philip.la@gmail.com !

My STARTUP :

Let me introduce myself. My name is Richard Nata.I am an author, novelist, blogger and ghost writer. My articles, including short stories have been published in magazines and newspapers since 1994. I have written a lot of books, both fiction and non-fiction. So I was a professional in the field of writing, both fiction and non-fiction.

I was born in Jakarta, August 17, 1968.

In 1988, at the age of 20 years, I started working as an accounting staff. Age 24 years has occupied the position of Finance Manager. Age 26 years as a General Manager.

In 1994, my articles published in magazines and tabloids.

In 1997, I wrote a book entitled "Buku Pintar Mencari Kerja". This book is reprinted as much as 8 times. Through the book, the authors successfully helped tens of thousands of people get jobs at once successful in their careers. They were also successful when moving to work in other places.

In 1998, I started investing in shares on Bursa Efek Indonesia (Indonesia stock exchange). As a result of investing in the stock market then I can provide consulting services for companies that want to go public in Indonesia stock exchange.

In theory, in 10-20 years into the future, my startup income, amounting to hundreds of million USD annually can be obtained easily. AND IF FOLLOWED BY MANY COMPANIES IN THE WHOLE WORLD WILL THEN BE A NEW INDUSTRIAL worth trillions USD.

To be honest. Currently I'm not having a lot of money. So I start marketing my startup with blogspot.

My STARTUP :

A story with millions of choices in it - looking investor like you.

Try to imagine this. When you're reading a story on the web or blog, you are given two choices. You can choose the next story based on your own choice. After selecting then you can continue reading the story. Shortly afterwards you will be presented back to the 2 other options. The next choice is up to you. Then you continue the story you are reading. After that you will be faced again with 2 choices. So onwards. The more stories you read so the more options you have taken.

If you feel curious then you can re-read the story by changing your selection. Then you will see a different story with the story that you have read previously. The question now is why is this so? Because the storyline will be varying according to your choice.

I, as the author is planning to make tens of thousands of articles with millions of choices in it. With tens of thousands of articles then you like to see a show of your favorite series on TV for several years. The difference is while watching your favorite TV series, then you can not change the story. Meanwhile, if you read this story then you can alter the way the story according to your own choice.

You might say like this. Sounds like a book "choose your own adventure". Books I read when I was young.

Correctly. The idea is taken from there. But if you read through a book, the story is not so exciting. Due to the limited number of pages. When a child first you may already feel interesting. But if you re-read the book now then becomes no fun anymore because you don't get anything with the amount of 100-200 pages.

Have you ever heard of game books? When you were boy or girl, did you like reading game books? I think you've heard even happy to read it.

A gamebook is a work of fiction that allows the reader to participate in the story by making effective choices. The narrative branches along various paths through the use of numbered paragraphs or pages.

Lihat preview menurut Yahoo

Bantam Books with the Choose Your Own Adventure series has produced more than 250 million US dollars. While I offer you more powerful than the Choose Your Own Adventure. Because of what? Because the story that I made much more interesting than the stories created by the authors of Bantam Books. You will not get anything just to 100-200 pages. While the story that I created is made up of tens of thousands of articles with millions of choices in it.

Based on the above, then you are faced with two choices. Are you interested in reading my story is? Or you are not interested at all. The choice is in your hands.

If you are interested then spread widely disseminated this article to your family, friends, neighbors, and relatives. You can also distribute it on facebook, twitter, goggle +, or other social media that this article be viral in the world. By doing so it is a new entertainment industry has been created.

WHY DO I NEED STARTUP FUNDS FROM INVESTORS? I NEED A LOT OF FUNDS FROM INVESTORS BECAUSE I HAVE TO LOOKING FOR EXPERT PROGRAMMERS(IT).BECAUSE THE DATA IS HANDLED IS VERY LARGE, IT MAY HAVE TO WEAR SOME PROGRAMMERS(IT).I CAN NOT WEAR SOME FREELANCE PROGRAMMER BECAUSE THE DATA MUST BE MONITORED CONTINUOUSLY FROM VIRUSES, MALWARE, SPAM, AND OTHERS.IN ADDITION FUNDS FROM INVESTORS IS ALSO USED TO BUY SERVERS WITH VERY LARGE CAPACITY. FUNDS ARE ALSO USED TO PAY EMPLOYEE SALARIES AND OPERATIONAL COSTS OF THE COMPANY.

FUNDS CAN ALSO BE USED FOR ADVERTISING AND OTHER MARKETING STRATEGIES.FUNDS CAN ALSO BE USED TO ADVERTISE MY STARTUP AND OTHER MARKETING STRATEGIES.

IF I GET A VERY LARGE FUND, THE PART OF THE FUNDS USED TO TRANSLATE THE STORY INTO VARIOUS LANGUAGES.With more and more languages, the more readers we get.

WITH MORE AND MORE READERS, THE MORE REVENUE WE GET.

AS AN INVESTOR THEN YOU DO NOT HAVE TO FEEL ANXIOUS ABOUT YOUR FUNDS. BECAUSE YOUR FUNDS WILL NEVER BE LOST BECAUSE IN 3-5 YEARS YOU HAVE RETURNED THE FUNDS COUPLED WITH PROFIT.

THIS BUSINESS IS ONE AND THE ONLY ONE IN THE WORLD.

If we can make a good story, so that the readers will come again and again for further reading the story then our earnings will continue to grow and will never diminish. This is due to new readers who continued to arrive, while long remained loyal readers become our customers.

So that the number of our readers will continue to multiply over time. With the increasing number of loyal readership then automatically the amount of income we will also grow larger every year. The same thing happened in yahoo, google, facebook, twitter, linkedin, and others when they still startup.

Deuteronomy {28:13} And the LORD shall make thee the head, and not the tail; and thou shalt be above only, and thou shalt not be beneath; if that thou hearken unto the commandments of the LORD thy God, which I command thee this day, to observe and to do [them: ]

Try to imagine this. If I give a very unique story. It was the first time in the world. But the world already know this story even liked it. Because the world love the game books. While the story that I made is the development of game books.

Do you Believe ifI dare say if I will succeed because my story will be famous all over the world as Harry Potter?

I believe it. Not because I was the author of the story, but because of the story that I made is unique and the only one in the world.

Income from my startup :

1. Ads. With millions of unique visitors, the price of the ads will be expensive.

2. Affiliate marketing. In addition to advertising, we are also able to put up some banner from affiliate marketing.

3. Contribution of the readers. If you have a million readers and every reader to pay oneUS dollarper year then you will get the income of one million US dollars per year.

If you have a million readers and every reader to pay one US dollar per month then you will get as much revenue twelve million US dollars per year.

4. Books and Comics. After getting hundreds of thousands to the millions of readers of the story will be made in books and the form of a picture story (comics).

5. Movies. If we have a good story with millions of readers then quickly we will be offered to make a film based on the story.

6. Merchandise related to characters. After the movies there will be made an offer for the sale of goods related to the characters.

7. Sales. With millions of email that we have collected from our readers so we can sell anything to them.

Each income (1-7) worth millions to tens of millions of US dollars.

Because each income (1-7) worth millions to tens of millions of US dollars. Then in 10-20 years into the future, AI will be earning hundreds of million USD annually.

So how long do you think my story that I made could gather a thousand readers? Ten thousand readers? One hundred thousand readers? A million readers? Five million readers? Ten million readers? More than ten million readers?

But to get all of it of course takes time, can not be instant. In addition, it takes hard work, big funds and placement of the right people in the right positions.

By advertising, viral marketing, strong marketing strategies and SEO then a million readers can be done in less than a year. Ten million readers can be done in two to three years.

This is the marketing strategy of my startup.

When hundreds of thousands or millions of readers already liked my story then they have to pay to enjoy the story that I made.

If you are a visionary then you will think like this.

With the help of my great name in the world of business, my expertise in marketing, advertising, marketing by mouth, viral marketing, then collecting a million readers to ten million readers will be easy to obtain. Is not that right?

The question now is what if people like my story as they like Harry Potter? You will get tens of millions or even hundreds of millions of email addresses from readers. With that much email, we can sell anything to the readers.

Since April 2013, Wikipedia has around 26 million articles in 285 languages are written by 39 million registered users and a variety of anonymous people who are not known from other parts of the world. Web ranked by Alexa, Wikipedia is a famous website number 6 which has been visited by 12% of all Internet users with 80 million visitors every month and it is only from the calculation of America.

So do not delay. Invest your money immediately to my startup. Take A Look. There are so many advantages if you want to invest in my startup.

WHY YOU SHOULD INVEST YOUR MONEY RIGHT NOW? .

IF YOU INVEST YOUR FUNDS IN ONE, TWO OR THREE YEARS INTO THE FUTURE, YOU MAY BE TOO LATE.BECAUSE IN 1-3 YEARS INTO THE FUTURE THEN I'VE GOT THE FUNDS. THE FUNDS CAN COME FROM SOME INVESTORS, LOANS FROM BANKS OR FROM ADVERTISEMENTS POSTED ON MY BLOG.IF I'VE GOT A LARGE AMOUNT OF FUNDS THEN I'VE NO NEED OF YOUR FUNDS. SO INVEST NOW OR NOT AT ALL.

My BLOG started to be written January 11, 2015. TODAY, MAY 30, 2015, THE NUMBER OF CLICKS HAS REACHED 56,750. SO FAR SO GOOD.

If I get big funds from investors then with a quick story that I wrote will spread throughout the world.So I got acceleration because I can put ads in a large variety of media such as Google AdWords, Facebook, and others. I also can perform a variety of other marketing strategies.

If I do not get funding from investors then my story would still spread throughout the world. But with a longer time, Slow but sure.So either I get funding from investors or not, the story that I wrote will remain spread throughout the world. Ha ... 7xSo don't worry, be happy.

My advice to you is you should think whether the data that I have provided to you makes sense or not .

If my data reasonable then immediately invest your funds as soon as possible.

Then we discuss how we plan further cooperation.

Thank you.

Lord Jesus bless you.

Amen

P.S. The offer letter I gave also to the hedge funds and venture capital and other major companies in the entire world. So who is fast then he will get it.